Warning for anyone with a side hustle to act quickly and avoid fines of up to £100
FREELANCERS, consultants and anyone with a side hustle or newly self-employed are running out of time to avoid a hefty fine from the taxman.
Workers who received income in this way between April 2023 and 2024 need to register to complete a self-assessment tax return.
The deadline to do this is looming on October 5, 2024.
If you fail to register in time you could face a fine of £100.
The self-assessment tax return needs to be filed and paid by midnight on 31st January 2025.
If this deadline is missed, you risk a fine of £100 if their tax return is up to three months late.
You also face further fines of £10 a day after three months, up to a maximum of £900.
If you’re six months late making your payment, you’ll be fined 5% of the tax you owe or £300, whichever is greater.
The taxman said there are many myths around self-assessment.
First is that as the taxman hasn’t been in touch, you don’t need to file a tax return.
In reality, the onus is on you to work out if you need to complete a tax return.
You are likely to need register for the self-assessment if you:
- Are newly self-employed and have earned income over £1,000
- Earned below £1,000 and wish to pay Class 2 National Insurance Contributions voluntarily to boost entitlement to State Pension
- Are a new partner in a business partnership
- Have received any untaxed income over £2,500
- Receive Child Benefit payments and need to pay the High Income Child Benefit Charge because they or their partner earned more than £50,000
Registering is relatively straightforward, you just need to go on the gov website.
You can file your return for the last tax year when you like, but the deadline to pay is 31 January 2025.
You may be able to set up a Budget Payment Plan to help spread the cost of Self Assessment tax bills, by making weekly or monthly direct debit payments towards in advance.
Even if you don’t owe tax, you may need to fill in a return to claim a tax refund, claim tax relief on business expenses, charitable donations, pension contributions, or to pay voluntary Class 2 National Insurance Contributions.
Chief executive oftax insurance consultancy Qdos, Seb Maley said: “It’s one of those crucial tax deadlines that flies under the radar. When it comes to tax and the self-assessment in particular, getting things sorted as soon as possible can go a long way to managing your tax affairs correctly from the off.
“For those with new side hustles, people who have recently gone freelance or started a business, this simple but vital step is easily overlooked. But as you can imagine, to ensure your compliance from the word go, avoid potential fines and penalties and potentially an investigation, it pays to register sooner rather than later.”
You don’t need to pay tax or fill out a tax return if you are selling old clothes, books, CDs and other personal items through online marketplaces.
Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We want to make sure you are clear about your tax responsibilities.
These myth busters and our range of resources on GOV.UK can help if you are unsure if Self Assessment applies to you or think you no longer need to file a tax return. Just search ‘Self Assessment’ on GOV.UK to find out more.”
Be aware that scammers use tax deadlines to try to trick people out of cash.
You should not share your HMRC login details with anyone, including a tax agent if you have one.
DO I NEED TO PAY TAX ON MY SIDE HUSTLE?
When you’re employed the company you work for takes the tax from your earnings and pays HMRC so you don’t have to.
But anyone earning extra cash, for example from selling things online or dog walking, may have to do it themselves.
Stephen Moor, head of employment at law firm Ashfords, said: “Caution should be taken if you’re earning an additional income, as this is likely to be taxable.
“The side hustle could be treated as taxable trading income, which can include providing services or selling products.”
You can make a gross income of up to £1,000 a year tax-free via the trading allowance, but over this and you’ll usually need to pay tax.
Stephen added: “The applicable tax bands and the amount of tax you need to pay will depend on your income.”
How do I file a tax return?
TO file a self assessment tax retun, you'll need to register with HMRC first, which will then issue you with a Unique Taxpayer Reference (UTR).
You must register for self assessment by October 5 if you have to file a tax return and you have not sent one before.
You can do so by visiting www.gov.uk/register-for-self-assessment.
If you’ve previously registered and already have a UTR, you don’t need to go through this step again.
Once you’ve got your UTR, you can sign in via the “Self Assessment tax return” section of HMRC’s website by visiting www.gov.uk/log-in-file-self-assessment-tax-return.
You can then file your self assessment tax return online.
The deadline for sending a return online is January 31 every year.
If you need a paper copy of the main Self Assessment tax return, call HMRC on 03000 200 3610 and request an SA100 form.
The deadline for sending a return using a paper form is October 31 every year.
You need to pay the tax you owe by midnight on January 31 each year.
HMRC accepts your payment on the date you make it, not the date it reaches its account.
File late and HMRC will issue you with a fine.